OSU favors parking-lease bid of $483 million

Wednesday

Jun 6, 2012 at 12:01 AMJun 6, 2012 at 10:18 AM

Ohio State University has been offered $523 million by private investors to lease its parking operation. But it would have to allow parking rates to rise by as much as 7.5?percent a year for the next decade to get that money.

Encarnacion Pyle, The Columbus Dispatch

Ohio State University has been offered $523 million by private investors to lease its parking operation. But it would have to allow parking rates to rise by as much as 7.5?percent a year for the next decade to get that money.

Campus leaders don’t want to do that, so yesterday they said they were sticking with a $483 million bid that would cap the annual increase in parking costs at 5.5 percent.

Even though the $483?million is not the highest bid, it is still $108?million more than the $375 million that officials said OSU needed to make a lease agreement worth considering.

It would help the university increase its endowment by a projected $4.9?billion over the 50?y ears of the lease, assuming an average annual return of 9 percent on its endowment, said Geoff Chatas, OSU’s chief financial officer. At that rate, it would also bring in an additional $4 billion to add professors, student scholarships and initiatives in the arts and humanities.

In a worst-case scenario, that money would help Ohio State weather potential budget cuts tied to the poor economy, as well as dwindling federal money for student financial aid and research, Provost Joseph A. Alutto told OSU’s Senate Fiscal Committee yesterday. In the best of all worlds, Ohio State would use the cash to move the university from “excellence to eminence.”

The $483 million would be placed in the endowment, and a portion of the interest would be used for various programs. Administrators have proposed investing $200 million toward faculty initiatives and research, $150?million toward transportation and pedestrian projects, $83 million toward scholarships and $50 million toward a new arts district.

All three of the top bids were made by QIC Global Infrastructure, an investment-management group based in Australia, and LAZ Parking, a national parking company headquartered in Hartford, Conn. LAZ manages more than 600,000 spaces nationwide including more than 15,000 spaces for 11 campuses, including Boston College, the University of California-Berkeley and Yale University.

The lowest proposal came in at $390 million.

The two other bidders were Macquarie and IFM. Each of the three companies submitted three proposals for taking over the parking with annual fee increases of 5.5 percent, 6.5 percent or 7.5 percent for the first 10?years. After that, fees would increase at 4 percent per year or at the inflation rate, whichever is higher.

University officials are presenting some details of the proposals to various campus groups this week and expect to take them before the Board of Trustees for a vote on June 22. If trustees approve a contract with QIC, it would begin managing the university’s parking operations on Oct.?1. University officials have refused to release the companies’ full parking proposals, saying they will not do so until a contract is completed.

QIC has already made a $40 million deposit with OSU.

Skeptics asked why private investors would offer so much money to Ohio State if they didn’t stand to make a lot of money off the deal — presumably more than what they are paying OSU and what they could earn if they invested the money themselves.

“This is a loan in disguise, and we won’t even be able to enjoy the benefit of it for 30 years,” said Bruce Weide, a professor and associate chairman of computer science.

But others said the university has few alternatives.

“It’s a great college, and it’s losing ground,” said Lonnie King, dean of OSU’s College of Veterinary Medicine, referring to the effects of the economic downturn and the dwindling government support for higher education.

OSU has among the highest tuition and fees for veterinary students in the country, King said, and something needs to be done. “I can tell you, the status quo is a losing proposition.”